Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

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kg7
Posts: 13
Joined: Thu Jun 22, 2017 10:01 am

Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by kg7 » Thu Jun 22, 2017 6:44 pm

[Edited on 10/9/17]

Hello, I'm looking for a little help to correctly build a three (or 4?) fund portfolio given my situation. I was finally able to start 2 years ago (at 35) with just the 401k from work. Recently I opened 2 IRAs (self and wife), as well as taxable account.

Situation:

I'm not a U.S Citizen, though I should be OK to start investing in the U.S. I've been legally employed here since 2005 under the H1-B work visa after University. My employer of 3 years wants to keep me here and filed a Green Card petition + adjustment of status on my behalf in 9/17. My wife does not work due to H1-B dependent visa restrictions, thus everything is done with one income.

We intend to retire here. Though, my wife is from Portugal and we are contemplating splitting our time between Florida and Portugal (or Germany or in EU somewhere). I'm getting Portuguese citizenship through her so living in Europe won't be hard. We would consider applying for U.S Citizenship after 5 years of permanent residency, though taxes could be complex, we're researching it.

I'm looking to make up some ground with more aggressive savings and moderate investment risks. I trust my savings ability to save more than normal going forward. We live frugally and debt free other than mortgage (will be paid off in 5-6 years). Hope to retire from corporate work in 2035, 2040 or 2045 at the latest, and work on entrepreneur stuff.

Finances:

Age: 37 (wife is 35)
State of Residence: Florida
Tax Rate: 25% - Federal: 17.85% (Florida)
Salary: 82k/y, up 90k with bonuses; 95k with side earnings
Tax Filing Status: Married Filing Jointly (non working spouse)
Living expenses for 2: ~ $2300/month ~ $25k-$28k/year
Mortgage: $160k @ 3.25% (15y refi. on 8/17 - purchased new in 9/07 @ $263k)
Monthly debts: $0

---------------------

Cash on hand: $20k (includes $11k for his and her IRAs for 1/2018)
Emergency fund: ~ € 30k Euros (~ $35k USD) in French bank @ 6%/y

Monthly / yearly savings allocation:

1. Retirement accounts: Max 401k and 2 x Roth IRAs (18k + $11k = $29k)
2. $1000 x 12 extra mortgage payments (pay house off in 5-6 years or less)
3. $1000 x 12 as contributions towards VG taxable investment account
4. Remainder in savings @ 1.25% - cash on hand or backup emergency

---------------------

[Edited this section on 10/13/2017]

Vanguard quiz AA: 60/40 - Though, 70/30 seems more appropriate
International AA: ~ 20-30% Intl. Stock (not sure about Intl. Bonds?)

Acceptable?

70/30:

35% U.S Stock
30% Intl. Stock
25% U.S Bonds (or 30% to be a tad safer)
10% Alternates (or 5% - for individual stocks I may be interested to hold)

Or 60/40 (more bonds to rebalance in stocks in case of a down market?)

30% U.S Stock
30% Intl. Stock
40% U.S Bonds

Any thoughts?

--------------------

Vanguard Retirement assets:

Vanguard Taxable Account: $10k
Currently: VG Money Market - 100%
Planned allocation: 30% - VG Total International - VTIAX - .11

Vanguard Roth IRA: $5.5k (opened for myself on 9/1/2017)
Currently: VG Money Market - 100%
Planned allocation: TBD

Vanguard Roth IRA: $5.5k (opened for her on 9/1/2017)
Currently: VG Money Market - 100%
Planned allocation: TBD

---------------------

John Hancock (JH) 401k Retirement acct.:

Current balance: $40k
Return: ~15% (since inception in 2015)

Company match? Yes - 4% (bonuses/profit sharing go into 401k)
Contributions: Maxed $18k for 2017 (includes $6300 as Roth 401k)

Current Fund: 100% in 500 Index Fund - JFIVX - ER .63 (cheapest)

List of available JH Funds...

Target Date Funds:

JH Multi-Index 2060 Preserv - JCHOX - 0.78 - Target Date 2051+
JH Multi-Index 2055 Preserv - JRIYX - 0.79 - Target Date 2051+
JH Multi-Index 2050 Preserv - JRIOX - 0.79 - Target Date 2046-2050
JH Multi-Index 2045 Preserv - JRVOX - 0.78 - Target Date 2041-2045
JH Multi-Index 2040 Preserv - JRROX - 0.77 - Target Date 2036-2040
JH Multi-Index 2035 Preserv - JRYOX - 0.77 - Target Date 2031-2035
JH Multi-Index 2030 Preserv - JRHOX - 0.77 - Target Date 2026-2030
JH Multi-Index 2025 Preserv - JREOX - 0.76 - Target Date 2021-2025
JH Multi-Index 2020 Preserv - JRWOX - 0.76 - Target Date 2016-2020
JH Multi-Index Income Preserv - JRFOX - 0.79 - Target Date 2011-2015

Aggressive Growth (Stocks)

DFA U.S. Small Cap Fund - DFSTX - 0.97 - Small Blend
Franklin Small-Mid Growth - FRSGX - 1.06 - Mid-cap Growth
Intl Equity Index Fund - JIEQX - 0.72 - Foreign Large Blend
New Opportunities Fund - JISOX - 0.94 - Small Blend
Small Cap Index Fund - JESIX - 0.68 - Small Blend
Vanguard Explorer Fund - VEXRX - 0.94 - Small Growth
Vanguard Small Cap Grow Index - VSGAX - 0.67 - Small Growth
Vanguard Small Cap Value Index - VSIAX - 0.67 - Small Value

Growth (Stocks):

500 Index Fund - JFIVX - 0.63 - Large Blend - Currently 100% invested
Blue Chip Growth Fund - JIBCX - 0.97 - Large Growth
Capital World Growth & Income - RWIFX - 1.05 - World Stock
ClearBridge Aggressive Growth - SHRAX - 1.25 - Large Growth
Fundamental Investors - RFNFX - 0.9 - Large Blend
Lord Abbett Value Opps Fund - LVOSX - 1.25 - Mid-cap Blend
Mid Cap Index Fund - JECIX - 0.66 - Mid-cap Blend
New Perspective Fund - RNPFX - 1.05 - World Stock
SMALLCAP World Fund - RSLFX - 1.32 - World Stock
Templeton World - TEMWX - 1.17 - World Stock
Investment Company of America - RICEX - 0.89 - Large Blend
Vanguard Mid-Cap Value ETF - VOE - 0.73 - Mid-cap Value
Washington Mutual Investors - RWMFX - 0.9 - Large Value

Income (Bonds):

Core Bond Fund - JICDX - .77 - Intermediate-term Bond
Fidelity Advisor Total Bond Fun - FEPIX - .85 - Intermediate-term Bond
Templeton Global Bond Fund - TPINX - 1.03 - World Bond
Total Bond Market Fund - JTBMX - .67 - Intermediate-term Bond

Growth and Income:

BlackRock Global Allocation - MALOX - 1.15 - World Allocation
Capital Income Builder - RIREX - 0.9 - World Allocation
Ivy Asset Strategy Fund - WASAX - 1.09 - World Allocation

Conservative:

John Hancock Stable Val -(Does not have a Ticker) - 1.05 - Ultrashort Bond

---------------------

[Edited on 10/13/2017]

Regarding Traditional 401k and Roth 401k:

For 2017 I maxed the 401k this way: $11700 in the Trad. 401k, and $6300 as Roth 401k contributions. For 2018, I wanted to do $4500 in Roth 401k, for "an even $10k/year" in post tax contribution that I could eventually roll into my Roth IRA if I even left my current job. I changed my mind and will instead max the Trad. 401k and put the tax savings in a savings account and use them for Roth IRA contributions for 2019. Thanks @Dottie57.

---------------------

Regarding 401k Allocation:

The three-fund theory emphasizes low cost, but I'm told I should use the 401k to do most of the rebalancing once my AA is built correctly; however funds available in my plan aren't the cheapest. Any way around this or just something I have to deal with until I have better options elsewhere?

---------------------

Individual taxable account (in process of opening):

I would like the ability to buy and hold stocks for things I'm interested in (3-5% as alternative investments) when I have extra cash outside of my main AA. Trade fees at Ally and others $2 cheaper than at Vanguard. Is there a problem with keeping assets at different companies if certain costs for some goals are cheaper elsewhere?

---------------------

Thanks for your help!

G.
Last edited by kg7 on Fri Oct 13, 2017 4:37 pm, edited 65 times in total.

User avatar
Watty
Posts: 11568
Joined: Wed Oct 10, 2007 3:55 pm

Re: Late to start investing - Need help planning

Post by Watty » Thu Jun 22, 2017 11:12 pm

I might have missed it but a big question is if you are planning on staying in the US for the rest of your life. I don't understand all the details but there are lots of complications if you have retirement accounts and then decide to leave the US when you retire.

The 5% mortgage rate is not good so I would take a hard look at paying that down or refinancing that loan.

kg7
Posts: 13
Joined: Thu Jun 22, 2017 10:01 am

Re: Late to start investing - Need help planning

Post by kg7 » Thu Jun 22, 2017 11:39 pm

Watty wrote:I might have missed it but a big question is if you are planning on staying in the US for the rest of your life. I don't understand all the details but there are lots of complications if you have retirement accounts and then decide to leave the US when you retire.

The 5% mortgage rate is not good so I would take a hard look at paying that down or refinancing that loan.
Thanks for the reply. Yes, the plan is to stay and retire in the U.S, provided the green cards get delivered on time. As of now, I'm still on the H1-B work visa until 2019, and the green cards are still in process... expected early 2019. Just don't know what might happen if things don't work out by then and money is tied up in investment accounts here... but it would also be unwise to keep going at my age without some kind retirement strategy in place.

Edit: Mortgage was refinanced at 3.25%, and I paid a large chunk down. Updated in details.
Last edited by kg7 on Mon Oct 09, 2017 7:13 pm, edited 1 time in total.

MoonOrb
Posts: 861
Joined: Thu Jan 24, 2013 6:58 pm

Re: Late to start investing - Need help planning

Post by MoonOrb » Thu Jun 22, 2017 11:46 pm

I'd put money into a Roth IRA before a Roth 401k. I don't know what your fund options are, but I'm guessing your 401k fund choices might have higher expense ratios than what you could get from opening a Roth IRA directly with Vanguard or Fidelity.

kg7
Posts: 13
Joined: Thu Jun 22, 2017 10:01 am

Re: Late to start investing - Need help planning

Post by kg7 » Fri Jun 23, 2017 12:56 am

MoonOrb wrote:I'd put money into a Roth IRA before a Roth 401k. I don't know what your fund options are, but I'm guessing your 401k fund choices might have higher expense ratios than what you could get from opening a Roth IRA directly with Vanguard or Fidelity.
Edit:

Definitely maxed out the Roth IRAs for myself and my wife.

Also updated original post with Available 401k funds and additional details about the status quo.

kg7
Posts: 13
Joined: Thu Jun 22, 2017 10:01 am

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by kg7 » Mon Oct 09, 2017 7:10 pm

Updated original post with new details on current status, desired AA, available 401k funds. Need help on how to go about building a simple a tax efficient three-fund portfolio (ETFs or Mutual Funds?) across 3 or 4 retirement accounts given the late start.

All help is greatly appreciated.

G.

Dottie57
Posts: 2252
Joined: Thu May 19, 2016 5:43 pm

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by Dottie57 » Mon Oct 09, 2017 8:13 pm

JFIVX - 500 index fund. These 2 may come close to total market
JECIX - midcap index fund

JIEQX - international index fund

JTBMX - intermediate bond fund


I did not look these up but assume they are indeed index funds which track a well known index.

As for Roth, i prefer putting all in traditional 401k and either pump up emergency fund or add the tax savings to a plain old brokerage account (not tax deferred)

oslocal
Posts: 17
Joined: Sat May 21, 2016 5:30 pm

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by oslocal » Mon Oct 09, 2017 8:17 pm

Hi,

I think your start is very good. First of all, my advice assumes that you and your wife treat all your money as pooled, in which case it doesn't matter if the money is in your or her name. As for the taxable account, you should (if it is possible) make it a joint account already.

I will try to tailor my advice to be very simple to understand and also be efficient in terms of fees. Use mutual funds, because they are very easy and you can set it on auto-pilot.

You can't actually make a complete 3-fund portfolio in your 401k since there's no Total Stock Market fund there (it would be 4 funds), I would invest both the IRA/Roth IRAs in TSM (VTSMX, 0.20 ER), when you add another 5500 to each of them in January, you can convert to Admiral (0.10 ER)
In January, you will then have 22,000 or so in TSM.

Second, I think as long as you're good with your budget and keep your emergency fund, it doesn't matter too much what the rep said on the phone. I would put Total International in your taxable account VGTSX (0.18 ER). (If it's a joint account, you would also qualify for Admiral shares quicker for 0.11 ER)

The most interesting options in your 401k are: JTBMX Total Bond (0.67 ER), JIEQX Intl Equity (0.72 ER), JFIVX S&P 500 (0.63 ER).

Not exactly sure what the total assets is right now or will be in January, but let's say they are $90,000 right now, and you decide you want 1/3 in each of the funds, you want $30,000 in each. Since you already have 22K in TSM and 10K in International, you can balance the rest with your 401(k). Put 8K into S&P 500, 20K into International and 30K into the total bond market.
I wouldn't worry too much that the S&P isn't exactly like the TSM.

Then work out how to get 1/3 into each with your taxable going into International and your 401k to balance it to even it out.
Last edited by oslocal on Mon Oct 09, 2017 9:08 pm, edited 1 time in total.

oslocal
Posts: 17
Joined: Sat May 21, 2016 5:30 pm

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by oslocal » Mon Oct 09, 2017 8:31 pm

I noticed that you specified 80/20 for US/International. If this is what you ultimately decide on, then you could use the TSM mutual fund in your taxable account as well.

Specifically for your case, since there's a decent chance you would spend a fair bit of your time outside of the US, I think it's appropriate to use a larger international allocation.

I would use the Traditional 401(k) and IRA to the extent you can and perhaps generate additional funds with the tax breaks to contribute to your taxable account unless you're thinking that you might withdraw the contributions in which case a Roth IRA would be better. Also if you're ever in the 15% bracket, then you should use Roth as well.

I advise you to become familiar with how pension income is treated in the Portugal/US tax treaty (if that's the other place you would consider retiring). There are many jurisdictions that makes no distinction from Roth accounts and taxes withdrawals from them the same as Traditional accounts. In this case, you would be paying tax twice.
There are also some jurisdictions (I think Russia) that has a tax treaty specifying only 10% US withholding on US sourced pension income and no tax in Russia, in which case you would be paying tax only once and at a very low rate. I made a search and found this thread: viewtopic.php?t=165940
which seems to indicate that you could pay zero tax on withdrawals in retirement.

kg7
Posts: 13
Joined: Thu Jun 22, 2017 10:01 am

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by kg7 » Tue Oct 10, 2017 7:34 pm

oslocal wrote:
Mon Oct 09, 2017 8:31 pm
I advise you to become familiar with how pension income is treated in the Portugal/US tax treaty (if that's the other place you would consider retiring). There are many jurisdictions that makes no distinction from Roth accounts and taxes withdrawals from them the same as Traditional accounts. In this case, you would be paying tax twice. I made a search and found this thread: viewtopic.php?t=165940
which seems to indicate that you could pay zero tax on withdrawals in retirement.
Thanks for your feedback Oslocal.

Regarding pension income between U.S and Portugal:

The NHR status mentioned might solve the tax problem at least for 10 years, so it may have to be timed well. I'll have to figure out how it might apply for Portuguese citizens living abroad, as I'm in the process of obtaining Portuguese citizenship through marriage with my wife. We'll reside primarily in the States for now since my work and assets are here, and U.S Green Card is around the corner. Hopefully this doesn't derail our plans to become U.S citizens in a few years, but I'm starting to think there could be some tax implications to having dual citizenship in this case.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
First of all, my advice assumes that you and your wife treat all your money as pooled, in which case it doesn't matter if the money is in your or her name. As for the taxable account, you should (if it is possible) make it a joint account already.
I actually keep all accounts individual and list her as beneficiary in case something happens to me. We got into a situation where someone sued her and they tried to come after joint assets/accounts. Since then, I prefer to keep everything separate. Vanguard told me the working spouse could contribute to an IRA for non working spouse, so I opened a Roth IRA in her name and contribute for her until she's eligible to work in the U.S.

For taxe purposes, I file for us as MFJ, so I'm assuming with the new IRA for her, it shouldn't be too difficult.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
You can't actually make a complete 3-fund portfolio in your 401k since there's no Total Stock Market fund there (it would be 4 funds). The most interesting options in your 401k are: JTBMX Total Bond (0.67 ER), JIEQX Intl Equity (0.72 ER), JFIVX S&P 500 (0.63 ER). Not exactly sure what the total assets is right now or will be in January, but let's say they are $90,000 right now, and you decide you want 1/3 in each of the funds, you want $30,000 in each. Since you already have 22K in TSM and 10K in International, you can balance the rest with your 401(k). Put 8K into S&P 500, 20K into International and 30K into the total bond market. I wouldn't worry too much that the S&P isn't exactly like the TSM. Then work out how to get 1/3 into each with your taxable going into International and your 401k to balance it to even it out.
So AA should look like something like this?

Taxable
VTIAX - VG Total International stock

Roth IRA
VTSMX - VG Total Stock Market now
VTSAX - VG Total Stock Market Admiral in Jan 2018

401k:
JTBMX - Total Bond Market (US bond)
JIEQX - International equity (International Bonds necessary?)
JFIVX + JECIX - 500 Index Fund / Mid Cap Index Fund (to help balance VTSMX in Roth IRA)

I'll workout the numbers and see how I like this 4-5 fund allocation.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I would invest both the IRA/Roth IRAs in TSM (VTSMX, 0.20 ER), when you add another 5500 to each of them in January, you can convert to Admiral (0.10 ER). In January, you will then have 22,000 or so in TSM.
I did not know Investor shares could be converted to Admiral tax free + no cost. Good to know.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I think as long as you're good with your budget and keep your emergency fund, it doesn't matter too much what the rep said on the phone. I would put Total International in your taxable account VGTSX (0.18 ER). (If it's a joint account, you would also qualify for Admiral shares quicker for 0.11 ER)
I should be able to buy and maintain Admiral Shares of Total International stock (VTIAX) if the taxable account is opened with 10k (with 1k/month) correct? Or is there something about joint accounts that specifically help give admiral buying ability quicker? Also, emergency fund should last 15-16 months, which I think is acceptable. Monthly budget is allocated to max 401k and pay off the mortgage faster.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I would use the Traditional 401(k) and IRA to the extent you can and perhaps generate additional funds with the tax breaks to contribute to your taxable account unless you're thinking that you might withdraw the contributions in which case a Roth IRA would be better. Also if you're ever in the 15% bracket, then you should use Roth as well.
Being in a lower tax bracket would be ideal the time to withdraw comes (retirement). Whatever I have left that's not being invested will be used to build up a backup savings / emergency in USD as opposed to my current emergency account in Euros.
Dottie57 wrote:
Mon Oct 09, 2017 8:13 pm
As for Roth, i prefer putting all in traditional 401k and either pump up emergency fund or add the tax savings to a plain old brokerage account (not tax deferred)
I read Roth 401k contributions can be rolled into an existing Roth IRA when employment with the company ends. Since current employer offers Roth 401k option on top of the Traditional 401k, and they also pay pre-tax profit sharing or bonuses (between $5k and $8k per year) that go directly into the Traditional 401k on top of the already max $18k, I figured it could be beneficial to allocate some post tax money into the Roth 401k.

From what I understand, if I change jobs in 5 years for example, the $6300 Roth 401k contribution I made in 2017 + $22500 (4500x5) would total $28800, which would then be rolled into my exiting Roth IRA and instantly boost that account by $30k. So say I receive a $5k bonus yearly that's directly added to the Traditional 401k, it would still net a total of $18.5k in tax deferred contributions between mine and my employer.

Not acceptable? Or is there a flaw in my thinking?

Dottie57
Posts: 2252
Joined: Thu May 19, 2016 5:43 pm

Re: Started late but Started - Need help planning for 401k/IRAs/Taxable Three-fund portfolio

Post by Dottie57 » Tue Oct 10, 2017 7:47 pm

kg7 wrote:
Tue Oct 10, 2017 7:34 pm
oslocal wrote:
Mon Oct 09, 2017 8:31 pm
I advise you to become familiar with how pension income is treated in the Portugal/US tax treaty (if that's the other place you would consider retiring). There are many jurisdictions that makes no distinction from Roth accounts and taxes withdrawals from them the same as Traditional accounts. In this case, you would be paying tax twice. I made a search and found this thread: viewtopic.php?t=165940
which seems to indicate that you could pay zero tax on withdrawals in retirement.
Thanks for your feedback Oslocal.

Regarding pension income between U.S and Portugal:

The NHR status mentioned might solve the tax problem at least for 10 years, so it may have to be timed well. I'll have to figure out how it might apply for Portuguese citizens living abroad, as I'm in the process of obtaining Portuguese citizenship through marriage with my wife. We'll reside primarily in the States for now since my work and assets are here, and U.S Green Card is around the corner. Hopefully this doesn't derail our plans to become U.S citizens in a few years, but I'm starting to think there could be some tax implications to having dual citizenship in this case.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
First of all, my advice assumes that you and your wife treat all your money as pooled, in which case it doesn't matter if the money is in your or her name. As for the taxable account, you should (if it is possible) make it a joint account already.
I actually keep all accounts individual and list her as beneficiary in case something happens to me. We got into a situation where someone sued her and they tried to come after joint assets/accounts. Since then, I prefer to keep everything separate. Vanguard told me the working spouse could contribute to an IRA for non working spouse, so I opened a Roth IRA in her name and contribute for her until she's eligible to work in the U.S.

For taxe purposes, I file for us as MFJ, so I'm assuming with the new IRA for her, it shouldn't be too difficult.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
You can't actually make a complete 3-fund portfolio in your 401k since there's no Total Stock Market fund there (it would be 4 funds). The most interesting options in your 401k are: JTBMX Total Bond (0.67 ER), JIEQX Intl Equity (0.72 ER), JFIVX S&P 500 (0.63 ER). Not exactly sure what the total assets is right now or will be in January, but let's say they are $90,000 right now, and you decide you want 1/3 in each of the funds, you want $30,000 in each. Since you already have 22K in TSM and 10K in International, you can balance the rest with your 401(k). Put 8K into S&P 500, 20K into International and 30K into the total bond market. I wouldn't worry too much that the S&P isn't exactly like the TSM. Then work out how to get 1/3 into each with your taxable going into International and your 401k to balance it to even it out.
So AA should look like something like this?

Taxable
VTIAX - VG Total International stock

Roth IRA
VTSMX - VG Total Stock Market now
VTSAX - VG Total Stock Market Admiral in Jan 2018

401k:
JTBMX - Total Bond Market (US bond)
JIEQX - International equity (International Bonds necessary?)
JFIVX + JECIX - 500 Index Fund / Mid Cap Index Fund (to help balance VTSMX in Roth IRA)

I'll workout the numbers and see how I like this 4-5 fund allocation.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I would invest both the IRA/Roth IRAs in TSM (VTSMX, 0.20 ER), when you add another 5500 to each of them in January, you can convert to Admiral (0.10 ER). In January, you will then have 22,000 or so in TSM.
I did not know Investor shares could be converted to Admiral tax free + no cost. Good to know.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I think as long as you're good with your budget and keep your emergency fund, it doesn't matter too much what the rep said on the phone. I would put Total International in your taxable account VGTSX (0.18 ER). (If it's a joint account, you would also qualify for Admiral shares quicker for 0.11 ER)
I should be able to buy and maintain Admiral Shares of Total International stock (VTIAX) if the taxable account is opened with 10k (with 1k/month) correct? Or is there something about joint accounts that specifically help give admiral buying ability quicker? Also, emergency fund should last 15-16 months, which I think is acceptable. Monthly budget is allocated to max 401k and pay off the mortgage faster.
oslocal wrote:
Mon Oct 09, 2017 8:17 pm
I would use the Traditional 401(k) and IRA to the extent you can and perhaps generate additional funds with the tax breaks to contribute to your taxable account unless you're thinking that you might withdraw the contributions in which case a Roth IRA would be better. Also if you're ever in the 15% bracket, then you should use Roth as well.
Being in a lower tax bracket would be ideal the time to withdraw comes (retirement). Whatever I have left that's not being invested will be used to build up a backup savings / emergency in USD as opposed to my current emergency account in Euros.
Dottie57 wrote:
Mon Oct 09, 2017 8:13 pm
As for Roth, i prefer putting all in traditional 401k and either pump up emergency fund or add the tax savings to a plain old brokerage account (not tax deferred)
I read Roth 401k contributions can be rolled into an existing Roth IRA when employment with the company ends. Since current employer offers Roth 401k option on top of the Traditional 401k, and they also pay pre-tax profit sharing or bonuses (between $5k and $8k per year) that go directly into the Traditional 401k on top of the already max $18k, I figured it could be beneficial to allocate some post tax money into the Roth 401k.

From what I understand, if I change jobs in 5 years for example, the $6300 Roth 401k contribution I made in 2017 + $22500 (4500x5) would total $28800, which would then be rolled into my exiting Roth IRA and instantly boost that account by $30k. So say I receive a $5k bonus yearly that's directly added to the Traditional 401k, it would still net a total of $18.5k in tax deferred contributions between mine and my employer.

Not acceptable? Or is there a flaw in my thinking?
I prefer to take the tax savings. At my 28% marginal tax rate, For every 1000.00 I put in trad 401k, I save $280. That money goes into brokerage account or savings. If you were in a lower tax rate, I think roth would be great.

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